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Shares of retailer Express fell 22 percent to their lowest point after the company warned that
quarterly sales and earnings will fall below expectations.

The company expects third-quarter earnings per share to be between 16 and 20 cents, well below
the retailer’s previous expectation of between 27 and 32 cents. Analysts’ predictions were for
earnings of 29 cents per share.

Comparable-store sales are expected to be in the mid-single-digit range. The company’s third
fiscal quarter will end Oct. 27. The quarterly earnings report is expected about a month later,
Express said in a statement.

Express blamed the revision on “an abrupt change in (consumer) traffic” in September.

“While our sales in August were in line with the expectations we provided when we introduced
third-quarter guidance, trends became increasingly difficult in September,” said Michael Weiss,
chairman, president and CEO, in a statement.

Weiss said that customer traffic did improve in the final week of September after Express “
conveyed a clearer pricing message to our customers.” Shoppers have also reacted favorably to new
women’s sweaters, and the company continues to “generate solid sales within our men’s business.”&
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Shares closed at $11.68, down $3.33 or 22.2 percent for the day.

This follows a similar stock slump in May, after Express revised its full-year and
second-quarter outlooks downward after first-quarter sales went poorly. Problems at that time
included a delay in opening flagship stores in San Francisco and New York and disappointing
consumer reaction to its pricier knit sweaters.

The retailer’s recent promotional strategy of selling an item and offering a discount on a
second purchase fell flat.

The company may now employ less of this strategy, giving shoppers more flexibility and offer
simplified discounts, Wedbush Securities analyst Betty Chen said.

Inventory levels at Express rose after consumers shunned its pricier knit sweaters. The retailer
revised its sales strategy by introducing affordable knit tops in the women’s category and said the
new styles helped improve traffic in the final week of September.

“They did test a new pricing message by late September that got a slightly better reaction, but
that is not enough to salvage the quarter,” Chen said.

The revised expectations were a troubling sign for retailers in general, said Ken Perkins of
Retail Metrics in a note to investors.

“This is not an issue for September (comparable store sales) as much as it is a worry for what
is to come from retailers’ third-quarter earnings,” he said.